Development of Online Services for Wii, Xbox 360, PS3
May 23, 2007 / Jessica Hsu
19 Page, Topical Report
US$1,620 (Single User License)

Abstract

The launch of several new-generation game consoles towards the end of 2006 marked the beginning of a new era in the game console industry. The biggest difference between the new generation and the previous generation of consoles is their online services. Microsoft's Xbox 360, the Sony PS3, and Nintendo's Wii all provide a wide range of online services, including online games, online communities, and e-commerce. Besides games, the three leading game console vendors have also provided other types of entertainment services in their game consoles. In late 2007, Microsoft will work with AT&T to provide IPTV service using the Xbox 360. Sony has been working with IBM and Toshiba on the development of Cell processor applications, and Nintendo has also begun to offer new family entertainment services besides gaming. The report will analyze the online services of these game consoles and the business opportunities created by the services.
  •  List of Topics
  •  List of Figures
  •  List of Tables

Online Services - Game Console Vendors' New Opportunities

The most important feature of online services is the ability to support two-way communication. Providing online services allows game console vendors to achieve increased interaction with gamers. In the past, console vendors could only canvass gamers' views and secure their personal details through marketing activities and the information provided by distributors. Now, by using the Internet and online services, the game console vendors can interact directly with gamers, thereby improving gamer retention.

In the PlayStation Network Platform that Sony has introduced for the PS3, PlayStation Home has been designed to function as a virtual 3D community that integrates avatar, chat, leisure gaming, and online shopping functions. Sony hopes to create a gaming community and generate significant business opportunities, including the sale of virtual artifacts, online advertising, and audio/video downloading.

Compared to Wii Channels and PlayStation Network, Xbox Live has the advantage of having been in existence for longer. Xbox Live already has nearly six million registered users. A basic Xbox 360 gamer community is thus already in existence. The Xbox also benefits from the cross-platform integration of Windows resources. For example, starting in mid-May 2007, messages can be exchanged between Windows Live Messenger and the Xbox 360, and from June 2007 onwards Xbox 360 users will be able to play online games with PC gamers. Microsoft's product planning for the Xbox Live is already starting to focus heavily on multimedia/audiovisual functions. Xbox 360 owners in the US can already use the device to download high-definition movies and TV programs, and Microsoft has introduced the Xbox 360 Elite, with a high-capacity 120GB hard drive, to make downloading and storing data more convenient.

In the past, when video rental shops were the main source of video content, having control over the distribution channels was the key to success, hence the dramatic growth of chains such as Blockbuster. However, with the dawning of the broadband era, in the future consumers will be able to download movies and TV content over broadband Internet connections, and then store the content on storage devices in their own home. They will even be able to share content using wireless networking; Apple TV is leading the way in this respect. As consumers grow more comfortable with this content provision model, annual revenues from film and TV series downloading will grow dramatically.

Game console vendors are providing online community and lifestyle information functions to win and retain gamers' loyalty. In the meantime, they are planning the evolution of online services into a comprehensive entertainment platform that will expand their sources of revenue.

 

Game Console Vendors' Development of the Digital Home Market

Microsoft has already used the Xbox 360 to introduce its Media Center Edition software into the digital home environment. Now, with the integration of the Xbox 360 and Microsoft's IPTV Edition software, Microsoft is in a position to establish its software as the mainstream platform for IPTV devices. This strategy will enable Microsoft software to run in a wide range of digital home products. Xbox Live and IPTV on Xbox 360 already show how Microsoft is hoping to combine gaming, TV, and community creation to provide a comprehensive range of home entertainment services.

Microsoft's IPTV service ecosystem includes: the telecoms that provide the network infrastructure, the content providers, the hardware vendors, and the application software providers. By promoting the Microsoft TV Platform, Microsoft will be able to obtain licensing fees from hardware makers, cable TV operators, and telecoms. IPTV Edition will become a software solution that can be used in set-top box and other audiovisual devices.

Both Sony and Nintendo are a long way behind Microsoft in the utilization of online services to provide entertainment content for the digital home. All of the three companies have taken their game consoles as a starting point for expanding into e-commerce and online community development. Sony anticipates that the Cell technology that it developed with IBM and Toshiba will become the core element in a wide range of home entertainment products, while Nintendo continues to focus on gaming, providing home entertainment activities for all the family.

 

Figure 7

Comparison of Microsoft, Sony, Nintendo's Game Console Market Development Strategies

Source: MIC, July 2007


 

Appendix

List of Companies

 

AT&T Nintendo

 

 

IBM Microsoft

 

 

SCE

 

 

SOE

 

 

Sony

 

 

Toshiba

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